Strip Club Owners: Pay Your Damn Taxes, Pt. 2

Back in May, two clubs in Portland, OR were investigated for tax fraud by undercover federal agents (for at least one of those clubowners, tax evasion might be the least of his worries). Now similar news comes from Queens, where Robert Potenza—owner of the excellently named Gallagher’s 2000—has been in court explaining how difficult it is to keep up with all that pesky strip club cash.

The club is awash in cash, with typically $400,000 on-hand, some stashed in a broken refrigerator, a fishing tackle box or atop a metal beam.

That, combined with a habit of making cash deposits that fell just below the $10K federal reporting threshold, raised a red flag for the feds. One of the allegations was that Potenza paid his employees with cash, under the table. This poor judge; he has no idea how a strip club works:

Brooklyn Federal Judge Brian Cogan noted that the feds’ chief witness, the club’s former general manager, claims Potenza pays workers off the books but invoked his Fifth Amendment rights when asked about his own income.

“If the contention is that the dancers are being paid off the books, why didn’t I hear from a dancer?” Cogan wondered.

Well, for one, because they’d possibly be in for an audit of their own, and for two, if the club is like the majority in the U.S., the dancers aren’t paid one dime by the club. I asked one anonymous dancer about her time there just to be sure of this, and she said, “We weren’t paid and the fines were steep as hell ($100 for cell phones on floor). We had to pay house fee right when we checked in and they had a fine for paying your fee later…I kinda hated that system cause counting my money the night before I’d have to deduct 60-100.” So, no, no cash going from the club to the dancers, but of course, all house fees are paid by the dancers to the club in sweet untraceable cash.

It sounds like Potenza may get clear of this, as long as he didn’t say something stupid to the wrong person. I have to admit my own assumption that a strip club owner in Queens is probably a little more savvy about his gray area than those in the Pacific Northwest.
Also, they have such excellent local commercials. It’d be a shame not to have any more of these made.

Are there any gentleman’s clubs that treat their dancers as regular employees—paying them hourly wages, giving them medical, dental, vision insurance, paid vacation, paid sick, and no house fee required?

I have worked at clubs that treated dancers as employees insofar as we were on payroll and required to clock in and out, but no benefits were offered. I would be interested to hear if any clubs have ever done this.

You ask if the benefits would be a turnoff—of course not, if, as you hypothesize, no house fee is charged and we keep all that we earn aside from staff tipouts. But when dancers are employees, what usually actually happens is the club winds up keeping a greater portion of what we earn. At the most recent club I worked at with this structure, they kept almost all of the first four lapdances we did, and 20% of lapdance sales and 30-50% of VIP sales after that. In many clubs in California, where a lot of employee/IC lawsuits have taken place, dancers might get less than half of the price of a private dance.

I would be very surprised to hear of a club that paid dancers and did not keep a percentage of the dance prices. Many of us would rather pay a (reasonable) flat house fee up front than pay out 30-50% of our sales to the club.

Thanks for the info. So do you think a club that offers all the above benefits could be profitable by just the door charge and liquor sales alone, or do they need the house fees and a percentage of a dancer’s sales?

Mike in short answer no, most clubs cannot make it on alcohol sale alone, the reason? MOST Employees (not all) are money sucking dick holes to a company that tend to care about their own ass and not care about what a business goes though. That mixed with state liquor controls & taxes lead a many a club owner scratching their heads going how in shit does this pan out.

I am also always torn in this because most club owners cut any corners they can, often times at the expense of any employee and customer.

IE both club owners and club employees slit each others throats mostly without really understanding or knowing that they are doing such … mostly.

In the terms of adult clubs it’s simple, you sell a no overhead product, in this case it is the service the entertainer provides. PS the term “entertainer” is a nice legal loophole that provides any club from actually being forced to provide any and all entertainment to the patrons of a club a fair wage. For a really obnoxious example of this I actually sat in a city meeting once and heard one such owner defend it as “well you don’t pay your TV for it’s entertainment” and without reveling names and such, the board actually called it insightful look at the matter.

Now I will say that stage fees are retarded grasp at extra cash that really shouldn’t be given to a club owner as nothing was gained from it. But taking a percentage of a dancers services al be it a mild form of prostitution … I digress I do support, simply put, If I was a club owner, a dancer is renting my facilities to conduct business as such I don’t give shit away for free that is simply bad business, thus she rents out the establishments in the form of what goes on in the VIP room IE private dances, and the like. I would think that is fair so long as the entertainer agrees the rate for rental are fair, and thus uses the facilities.

I also see fines as a good policy to ensure policy is withheld, obviously an entertainer using a cell phone on the floor is tacky and further more draws away from the illusion of what a club aspires to. Late fees are a good way to ensure you have enough girls at the starting of the night as a dead club, means any customer walking in immediately walks out and thus starts an irreversible chain of bad publicity. But why so high you ask? Simple to make sure said offense doesn’t happen all the time, if you don’t want to be dinged don’t break policy.

The other side of that coin is retarded policies obviously made to ensure the dancers will always lose money. IE three minute smoke breaks or a $100 fine … even non smokers know 5 – 6 minutes is the minimum unless you are a fan of those 72s but really who in the blue fcuking hell smokes those? But a lot of policies in clubs are really their to protect the dancers in a variety of ways … at least in reputable clubs … wait for my book to hear about the other ones.

The short in skinny is that with increased legislation brought on by the CUSTOMERS in the category of liquor leads club owners to seek out “entertainment”, or other non overhead sales.